Share of the week: Clicks

The recovery in SA's retail sector is slowly gaining traction - and financial results from Clicks Group for the first half of the year bear this out.

Last week, the company announced turnover growth of 8.9% to R7.2-billion and an increase of 22% in diluted headline earnings per share to 122c.

SA's largest drugstore chain is one of the country's most impressive turnaround stories.

Until a few years ago, Clicks was an underperforming, staid, general retailer. The turnaround by CEO David Kneale, from Alliance Boots in the UK, included the company's exploitation of the drug market niche in SA.

Clicks said: "Management continues to invest in stores, systems and people for longer-term sustainability. A broad-based employee share-ownership scheme was introduced to accelerate transformation and black economic empowerment, as well as to retain and attract scarce and specialist skills."

This investment in stores seems to be one of Clicks's most successful strategies since the appointment of Kneale. The group has rolled out 20 to 30 stores a year and plans to open a further 118 over the next three to five years.

Another key pillar of Clicks's impressive financial results is consumers' preference for in-store branded goods (so-called house brands). Clicks's house brands constitute 20% of its sales, which includes its front shop and dispensary division. Clicks's front-shop private label accounted for 25.9% of sales over the six months to February.

Danie Pretorius, a retail ana-lyst at RMB Morgan Stanley said: "Clicks has become a story of phenomenal earnings."

But a potential spanner in the works for Clicks's furious expansion is the critical shortage of pharmaceutical skills in SA.

Kneale said recently that Clicks had vacancies for 200 pharmacists and was paying those it employed 23% more than it did last year. "There is a shortage of pharmacists the world over," he said.

The company's share price was trading at R42.76 on Thursday morning - almost double the lowest point it reached over the past 52 weeks, R29.40 on May 7 2010.